Connells Group has announced its acquisition of an independent Cambridgeshire agency - and it says...

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I suspect that at some time we have all rented an Airbnb (I am sitting on the couch of one as I type this, in fact), and perhaps wondered if we should do it ourselves to make a bit of extra cash for a rainy day.

It is these actions and attitudes that has made Airbnb a £30 billion business in just 11 years.

However, there are also issues that Airbnb fiercely battles, that of regulation and control against authorities, to deliver the service that it does.

This week these battles could come back to haunt it due to a new service being tested.

It was in a recent meeting that I decided I should cover this topic. I am currently in Sydney (hence the Airbnb - why would I consider a hotel when I can have my own space at a fraction of the cost?) preparing for a conference.

As part of that preparation, I love to sit and discuss the market with various groups of people. This included a listed property investment and management firm and a small start-up looking at tenant engagement and contractor management.

It was while meeting the founders of the latter that one of my usual questions came out as I pressed them to understand their ‘addressable market’.

In this case, it was the ‘what problems are you actually solving?’ question.

They stated it was clear. “Two problems, James, we are solving two problems”. One, as it turned out, was that of connectivity. I won’t bore you with those details but the other was transparency.

‘We want to bring transparency to the market,’ they said. This is admirable and should be a trait for most, if not all tech solutions, giving transparency to all sides of the market so accountability can follow.

It was then, later in the day, that I saw an article pop up in one of my WhatsApp groups that made me consider this further.

Let’s consider some facts for a minute. Eleven years after the first rental, Airbnb’s site now lists more than six million rooms, flats and houses in more than 81,000 cities across the globe. On average, two million people stay in an Airbnb property each night – half a billion since 2008. These are impressive figures.

So, what are the issues?

Aside from ‘hollowing out communities’, if this original Robocop article is to be believed it is because: “’Airbnb hosting’ has become something of a wild west market; very hard for regulators and tax officials to keep up with, given how fragmented and informal the supply chain is.”

“Airbnb has kept barriers high for local authorities wanting to check-in on their supply chain, and been aggressively litigious in protecting themselves from any form of regulation.”

Much of the backlash in the UK will have been around London and the implementation of the 90 day limit for short let stays was the result. However, this measure was almost laughed at by some as unenforceable. In fact, there was a BBC London report back in February of this year that showed just how some PropTech firms were trying to get around this (featured below).

Despite this, Airbnb is booming in London. A study from property services company Colliers suggested that Airbnb’s market share in London jumped threefold in 2017 from 2.8% to 7.6% of overnight stays.

However, this isn’t just about London. Edinburgh is another Airbnb hotspot. It has one Airbnb for every 42 residents, with peak demand times being through the popular Edinburgh festival.

Almost all cities in the UK have their own Airbnb story, their own first-hand experience of the growth of their market share. There is a considerable opportunity but also, now, a considerable consideration when advising potential landlords what to do (and what not to do).

Things are about to change with the advent of a new tech firm that has Airbnb in its sights: Host Compliance. Previous attempts at regulating the industry in the UK, mainly London it has to be said, have been curtailed as they were using particularly manual processes.

In some cases, physically visiting properties on regular occasions to try and enforce the regulations. It just isn’t feasible or cost effective to enforce a £20,000 fine.

This is where the tech play comes in. Host Compliance offers Artificial Intelligence (AI) technology that automatically scans the market and identifies hosts. The company is already working with 300 local authorities in North America, to collect taxes and enforce the rules.

Despite this being trialled in North America, as the article states: ‘An equivalent European offering, either run by them, or a competing venture seems inevitable’.

In the case of Host Compliance, the business model is to automate the identification of cheats, to put the onus on hosts to prove compliance, and effectively, to become a private tax collector.

For their efforts, local authorities are paying an undisclosed percentage of the value of the taxes collected; somewhere between 5% and 20% commission.

Obviously, it doesn’t take a brain cell to realise the returns will be significant if it works as it states. Equally, it could provide much transparency to very muddy and murky waters.

I remember the short lettings market well from my Foxtons days. I remember the increased revenue for landlords, meaning more fees for us.

Back then, it was just for a corporate market. The thought of a person on holiday or a business trip renting someone else’s room or property for a couple of nights or a week was just never thought accessible, affordable or particularly accommodating.

Airbnb changed all of that and it should be commended. However, it needs to be fair and transparent, as do the very landlords (or indeed supporting companies) benefiting from the system and the new ways to create revenue.

Perhaps, this is the first real solution to test another solution. A PropTech innovator challenging a PropTech disrupter, it could be said.

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Brave move, this will be a hard industry to get a foothold in. The only way I see the company winning is indeed using 'proptech' as the title says. Make the transaction smoother using technology and the new generation will surely jump on.

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